Credit score platform Paisabazaar, in a research, found that 37 per cent of new credit score consumers are under 25. The report titled 'Making India Credit Fit' released on November 7 said that this generation manages more than three active credit accounts as they approach their late 20s. A significant 20 per cent of these consumers handle five or more credit accounts before age 30. While easing access to credit leads to inclusiveness and greater financial harmony, it can also lead to a burgeoning debt trap, the report cautions.
Changing Credit Landscape: Very Early Access to Credit
Young Indians increasingly embrace credit at an early age, the research found. Specifically, those born in the 1990s, now in their early 20s to early 30s, are obtaining their first credit product at the young age of 23 (average). Those born in the 1970s started at 38, while the 1980s generation began at 28 to use credit.
Approximately 64 per cent of consumers obtained their first credit product before 30, with 37 per cent among them below 25. Further, 53 per cent acquired their first personal loan before turning 30, while 57 per cent got their first credit card before age 30. As much as 8 per cent took a home loan before age 25. Paisabazaar's report said this shifts from a necessity-driven approach to lifestyle-oriented credit use.
SMEs Struggle To Get Credit
In India, SMEs grapple with substantial credit access hurdles due to stringent eligibility criteria, limited income documentation, complex processes, and insufficient credit histories, especially for newer enterprises. The report found a credit access gap exists because of the following reasons. It says salaried individuals acquire their first credit card at age 27, while the self-employed do so at 30. Additionally, the average age for obtaining a first personal loan is 28 for salaried individuals and 30 for the self-employed. Housing loan approval rates are 28 per cent for salaried individuals and 19 per cent for the self-employed. Notably, 29 per cent of salaried individuals and 40 per cent of the self-employed gain access to credit only after age 30.
Inclusiveness in Credit Access: A Positive Shift
In FY 23, 75 per cent of new credit score consumers originate from non-metro regions, up from 55 per cent in 2019. This signifies a significant shift towards financial inclusiveness, with 37 per cent of non-metro consumers securing their first credit product before the age of 25, similar to a metro resident.
Regional Credit Health; Bengaluru Tops The List
The research identifies the credit health of various Indian cities in which a healthy credit score is above 770. Leading the list is Bengaluru, closely followed by Ahmedabad, Mumbai, Pune, Chennai, and Delhi. Notably, most credit-healthy cities are concentrated in Western India, with only a few in the North and Central regions.
